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The Spirit sword recalibrating society…?

Monthly Archives: October 2014

Our current circumlocutions around raising money for the governing of our country and the provision of vital public services must be reformed. We’ve inherited a plethora of systems, from Income Tax to National Insurance, which create too many loopholes and ensure that funds are wasted trying to collect what is due, rather than maximising the budgets available to invest.

Politicians need to bite the bullet and ensure that what we pay is clear for all to see, rather than obscured by myriad raids on our wallets. Income tax and National Insurance should be merged, so there is a simple levy, once and fairly on all incomes earned. Other systems, like VAT, need to be much better targeted to recoup the losses incurred to our nation by the choices people make and disincentive what we know causes harm.

Firstly, let’s look at your pay packets. Ironically, David Cameron is keen to trumpet the tackling of utility companies for their fiendishly complex billing systems, but seems loath to straighten out the distortions, perversities and layers of obfuscation in the much more important industry and business of government, which he, of course, is ultimately responsible for. It was not always thus, as his chancellor, George Osbourne, once appeared in favour of an income tax merger. He viewed this potential policy as “a radical reform” and “lasting legacy for the Government” that he did not wish remembered “for cuts, cuts and more cuts”.

Sadly, he lost his bottle. As the Daily Telegraph explained in February 2014:

The Taxpayers’ Alliance explores the reality of a £30,000 wage. Currently, employer’s National Insurance contributions come out at £3,3108, whilst employee’s NI works out at £2,671. Meanwhile, Income Tax is levied at £4,705, meaning that the total paid to the government is £10,484! Thus, they estimate, the Basic Rate Income Tax (under the simplified system) would need to be set at 39%. This could be extended to income/interest generated from savings and investments, currently taxed under a different rate, which would again make HMRC’s job much easier. Although some argue that electorates would balk on seeing the truth about tax, ultimately, bold reforms to remove irregularities and make pay slips more comprehensible would increase our trust in politicians as we see how our money is collected and spent.

National Insurance is seriously regressive and unfair. As an employee, we start paying National Insurance once we earn £153 a week – equivalent to £7.956 a year. We pay 12% of our income above this level in NI, which is applicable on all earnings up to £805 – equivalent to £41,860 per annum – and then we pay only 2% NI on anything thereafter. So, basically, those who earn most pay considerably less as a proportion of their income, meaning that the “stealth tax” is ripe for reform.

Another area for improvement is VAT. So-called “sin” taxes on incredibly harmful nicotine and alcohol have helped to restrict their usage and provide the funds necessary to treat all the problems these substances cause. Yet, we need to go further. With one in five 10-11 year olds in the UK classed as obese, there is something very sick in our society. We make purchasing an ultra-processed, sugar-saturated chocolate bar easier to obtain than a healthy banana. Why is there so little appetite for a sugar tax? This should be happening already, saving the most vulnerable in our society from all kinds of evils.

In conclusion, we need to be much smarter in how and what we tax. This is 2014, not 1799 when Income Tax was introduced to help beat Napoleon Bonaparte or 1911 when National Insurance arrived to pay for state pensions. Reforms are required and we need politicians to serve the people they are elected to represent.